Bonus depreciation lets an owner deduct part or all of the cost of qualifying property in the first year, instead of spreading it over many years. The 2025 federal tax law made the 100 percent rate permanent, and the IRS has now explained how it works.
What changed
Section 70301 of Public Law 119-21, signed July 4, 2025, replaced the yearly phase-down of bonus depreciation with a permanent 100 percent deduction for qualified property acquired, and placed in service, after January 19, 2025. IRS Notice 2026-11 says the rate for property placed in service in 2025 would otherwise have been 40 percent.
On January 14, 2026, the IRS released Notice 2026-11 as interim guidance. Treasury and the IRS intend to issue proposed regulations that follow it, and taxpayers may generally rely on the existing bonus depreciation regulations in the meantime.
Two points from the notice matter for planning:
- The cutoff is the acquisition date. Property is not treated as acquired after January 19, 2025 if a written binding contract for it was entered into on or before that date.
- A taxpayer may elect 40 percent instead of 100 percent for qualified property placed in service in the first tax year ending after January 19, 2025.
Who this affects
Apartment owners who buy, build or renovate. Bonus depreciation generally applies to property with a recovery period of 20 years or less. A residential rental building is depreciated over 27.5 years, so the building shell does not qualify. Items with shorter recovery periods, such as appliances, flooring and site improvements, often do. Classification is a question for your tax preparer.
Effective date
Property acquired after January 19, 2025. The IRS guidance came out January 14, 2026.
What owners should do
- Ask your CPA which purchases and renovations since January 20, 2025 qualify, and check contract dates.
- On acquisitions, ask whether a cost segregation study makes sense to identify shorter-life components.
- Decide with your CPA whether the 40 percent election or an opt-out fits your tax position for a given year.
- Keep invoices, closing statements and placed-in-service dates together for each asset.
This is a summary, not tax advice. Talk to your CPA about your own returns.